China's economy would suffer along with everyone else's. If China ever did call in its debt, it slowly would begin selling off its Treasury holdings. Even at a slow pace, dollar demand would drop. At some price point, U. China could start this process only after it further expanded its exports to other Asian countries and increased domestic demand. China's low-cost competitive strategy seems to be working. In , it grew at 6.
China has become one of the largest economies in the world. China also became the world's biggest exporter in China needs this growth to raise its low standard of living.
For these reasons, we'll likely see China remain one of the world's largest holders of U. Hilarey is an associate editorial director for The Balance and has held full-time and freelance roles at a variety of financial media companies including realtor. Department of the Treasury. The World Bank. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile.
Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. Treasury market, which is by far the largest and most liquid pool of safe assets in the world. Also, since the financial crisis of , U. Treasuries have consistently yielded more than bonds issued by other large developed economies such as Japan and Germany, which has been another lure.
Most analysts agree that large-scale selling by Beijing would disrupt the Treasury market and other markets. An abrupt shift in the balance of supply and demand could drive down Treasury prices, and drive up their yields, which move in the opposition direction to prices. That would cause a spike in borrowing costs for the U. Also, because Treasury yields are a benchmark for U. Beijing uses its Treasury holdings as a key tool to stabilize the yuan within a targeted range, against the dollar in particular.
I do not know either. But that is not a precise enough question. Russia colluding with China to form some currency alliance is not very believable outside of some trivial amount made for political purposes. These stories surface at least times a year and always with the same idle threats that never happen. Pettis point 3 is not going to happen because tiny countries do not have enough bonds for China to buy and it would severely distort the market if China tried, so it won't.
Pettis point 2 is more subtle but also note that there is no Euro global bond for China to even buy. There are only sovereign bonds of Germany, Italy, France, etc.
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